tiï O Q, Notes to the Consolidated Financial Statements (continued) 11.5 Credit, liquidity and market risk Introduction Report of the Executive Board Report of the Supervisory Board This note summarises the financial risks that HEINEKEN is exposed to, and HEINEKEN's policies and processes that are in place for managing these risks. For more information on derivatives used in managing risk refer to note 11.6. Risk management framework The Executive Board sets rules and monitors the adequacy of HEINEKEN's risk management and control systems. These systems are regularly reviewed to reflect changes in market conditions and HEINEKEN's activities. Managing the financial risks and financial resources includes the use of derivatives, primarily spot and forward exchange contracts, options and interest rate swaps. It is HEINEKEN's policy not to enter into speculative transactions. In the normal course of business HEINEKEN is exposed to the following financial risks: - Credit risk - Liquidity risk - Market risk Credit risk Credit risk is the risk of a loss to HEINEKEN when a customer or counterparty fails to pay. All local operations are required to comply with the Global Credit Policy and develop local credit management procedures accordingly. HEINEKEN regularly reviews and updates the Global Credit Policy ensuring that adequate controls are in place to mitigate credit risk. Credit risk arises mainly from HEINEKEN's receivables from customers like trade receivables, loans to customers and advances to customers. At the balance sheet date, there were no significant concentrations of credit risk. Heineken N.V. Annual Report 2018 Financial Statements Sustainability Review Other Information Loans and advances to customers HEINEKEN's loans and receivables include loans and advances to customers. Loans and advances to customers are secured by, among others, (bank) guarantees, rights on property or intangible assets, such as the right to take possession of the premises of the customer. HEINEKEN charges interest on loans to its customers. Trade and other receivables HEINEKEN's local management has credit policies in place and the exposure to credit risk is monitored on an ongoing basis. Under these policies all customers requiring credit above a certain amount are reviewed and new customers are analysed individually for creditworthiness before HEINEKEN's standard payment and delivery terms and conditions are offered. This review can include external ratings, where available, and in some cases bank references. Credit limits are determined for each customer and are reviewed regularly. Customers that fail to meet HEINEKEN's credit requirements transact only with HEINEKEN on a prepayment basis or Cash on Delivery. Customers are monitored, on a country basis, according to their credit risk characteristics, including whether they are an individual or legal entity, type of distribution channel, geographic location, ageing profile, maturity and existence of previous financial difficulties. HEINEKEN has a policy in place in respect of compliance with Anti Money Laundering Laws. HEINEKEN considers it important to know with whom business is done and from whom payments are received. Allowances HEINEKEN establishes allowances for impairment of loans and advances to customers, trade and other receivables using an expected credit losses model. These allowances cover specific loss components that relates to individual exposures, and a collective loss component established for groups of similar customers. The collective loss allowance is determined based on historical data of payment statistics and updated periodically to incorporate forward looking information. The loans and advances to customers, trade and other receivables are written off when there is no reasonable expectation of recovery. Investments HEINEKEN limits its exposure to credit risk by only investing available cash balances in deposits and liquid investments with counterparties that have strong credit ratings. HEINEKEN actively monitors these credit ratings.

Jaarverslagen en Personeelsbladen Heineken

Jaarverslagen | 2018 | | pagina 100